And that gambler, Bill Walters, may have mentioned it to golfing buddy Phil Mickelson. And both Walters and Mickelson may have bought stock options for Clorox before Icahn publicly announced his intentions, after which the bleach-maker’s stock jumped nearly 9%.

And… It all may have been entirely legal.

To be clear, I have no idea what evidence the SEC and FBI do or don’t have on the trio (and possibly a fourth investor, according to the NY Times). But I do know that insider trading law is extremely hazy when it comes to activist investors like Icahn.

For example, take what happened last month when activist Bill Ackman partnered with Valeant Pharmaceuticals (VRX) in its (still ongoing) attempt to buy Botox maker Allergan (AGN) . As we reported at the time, Ackman began quietly accumulating Allergan stock after learning from Valeant that the company was planning a takeover offer for Allergan, with the explicit promise to vote his shares in favor of the still-unannounced merger. Ackman clearly traded on material, non-public information, but most experts believe it didn’t qualify as insider trading for two reasons:

1. There was no breach of fiduciary duty to the holder of the confidential information (Valeant), since Valeant volunteered the information to Ackman.
2. Ackman publicly disclosed his Allergan position within the legally-acceptable window for doing so, via a filing with the SEC. Such filings are triggered after someone obtains more than a 5% position, but the built-in waiting period actually allowed Ackman to accumulate 9.7% of Allergan’s shares by the time of disclosure.

In the case of Icahn and Clorox,some similar principles may apply.

For starters, it is not illegal to tell someone about a pending trade. I can mention to a pal that I’m planning to buy 50 shares of IBM when the markets open tomorrow, and my pal could legally follow me into the trade. Same thing goes for following Icahn into a trade if he privately mentions his intentions, even though an Icahn purchase obviously has market-moving implications that my IBM trade does not. Moreover, Icahn appears to have dutifully disclosed all Clorox share purchases leading up to his takeover offer — with the Walters/Mickelson trades apparently occurring between the time he first disclosed his Clorox stake (February 2011) and the time of his takeover attempt announcement (July 2011).

It would have been illegal for Icahn to have leaked information about a formal takeover or tender but, but that’s not the strategy he pursued on Clorox. Instead, he publicly told the company that he was willing to buy up the 90.6% of Clorox that he didn’t already own at around a $10.2 billion valuation, but he never launched any sort of tender offer. Instead, the announcement really seemed intended to shake the trees for other interested buyers — particularly a strategic acquirer like Kimberly Clark (KMB) or Procter & Gamble (PG). When Clorox rejected Icahn’s offer as too low and no alternate bidder emerged by September, Icahn abandoned the effort. In the end, Icahn’s takeover attempt was little more than a toothless press release.

The one exception here would be if authorities believe that Icahn’s leaking to Walters violated confidentiality owed to shareholders in Icahn Enterprises (IEP), a publicly-traded limited partnership in which Icahn himself controls more than 90% of the shares. It’s a narrow prosecutorial path — particularly given that Icahn’s Clorox announcement caused Icahn Enterprises stock to move less than 1% — but it may be the best viable option if the SEC or FBI persist.

Ultimately, both the Icahn and Ackman experiences might really be little more than illustrations of how regulators often are playing from behind when it comes to activist investors. Until that changes — with the letter of the law matching its spirit — then many of these apparent conflicts may do little more than generate headlines. In the meantime, Icahn and Ackman will keep generating profits.

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